Higher oil prices lift Exxon's profit as production sags

Thu Jul 31, 2014 12:51pm EDT
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By Ernest Scheyder

(Reuters) - Exxon Mobil Corp XOM.N, the world's largest publicly traded oil company, reported a stronger-than-expected quarterly profit on Thursday as higher prices for its crude and natural gas offset a 6 percent drop in production.

Exxon has struggled in recent quarters to replenish its reserves quickly, investing in massive new projects in Russia and Papua New Guinea that take years to develop.

Meanwhile, many of its smaller, more-nimble peers have aggressively developed shale formations around North America, fueling massive production and exciting Wall Street.

"Declining production is a recurring theme for Exxon Mobil," said Edward Jones analyst Brian Youngberg. "The company remains growth-challenged, and a lot of that is due to their large size."

Adding to the company's challenges are Western sanctions against Russia, since Exxon is more involved in that country than any other U.S. oil company.

Lukoil LKOH.MM, Russia's second-largest oil producer, said on Wednesday that the sanctions would force it to slash capital spending due to limited access to funds.

Exxon is partnering with Lukoil peer Rosneft ROSN.MM to develop a large oil field off the eastern Russian coast, and analysts said Lukoil's announcement could be the harbinger of funding challenges for the entire industry in Russia.

Exxon said net income rose to $8.78 billion, or $2.05 per share, from $6.86 billion, or $1.55 per share, a year earlier. Analysts on average had expected earnings of $1.86 per share, according to Thomson Reuters I/B/E/S.   Continued...

The Belgian headquarters of oil giant ExxonMobil, where Britain's Nicholas Mockford worked, is pictured in Machelen, northern Brussels, in this file photo taken October 27, 2012. REUTERS/Sebastien Pirlet/Files